Geographical Indications of Origin as a Tool of Product Differentiation: The Case of Coffee

Abstract

An increasing interest in geographical indications of origin (GIs) as a tool of product differentiation can be observed in the so-called specialty coffee sector. Similar to the approach for wine in France and Italy, more and more coffee-producing countries try to establish appellation systems for coffee. Whereas some countries and regions such as Colombia or Jamaica have already legally protected GIs for coffee, most coffee GIs are still informal, meaning that no legal protection has been obtained so far. But the recent acceptation of the term Café de Colombia as a Protected Geographical Indication in the European Union and the Ethiopian Trademark Initiative document the increasing engagement of coffee-producing countries to achieve an appropriate legal protection for their GIs. From an economic point of view, data from U.S. online retail stores indicate that single-origin coffees receive significant higher retail prices, with 100% Kona coffee from Hawaii and Jamaican Blue Mountain coffee being the most expensive ones. Furthermore, results from a hedonic pricing model based on Internet auction data for single-origin coffees show that the country and the region of origin is already an important price determinant in the specialty coffee market.

KEYWORDS:

• coffee
• geographical indications of origin
• hedonic pricing analysis
• legal regulatory systems
• price premium

The author thanks Dr. R. Herrmann and two anonymous referees for their constructive and very helpful comments.

Notes

Note. CM = Certification Mark; CTM = Community Trade Mark; FNC = Federación Nacional de Cafeteros de Colombia; GI = Geographical Indications of Origin; PGI = Protected Geographical Indication; TM = Trademark.

^a In these cases no final determination as to the registrability of the mark has been made.

Source: Own presentation based on CTM-Online (2007), Official Journal of the European Union (2006), Schulte (2005), and Trademark Electronic Search System (TESS; 2007).

Source. Own presentation based on FAOStat (2010), Giovannucci et al. (2002), and Neilson (2005).

Note. ***, **, *indicates significance at the 0.1%, 1%, and 5% level, respectively;p values are presented in parentheses.

^a This is the estimated coefficient for the new constructed variable traditional.

COE = Cup of Excellence®.

Source: Own computations.

Source. Own computations.

Note. ***, **, *indicates significance at the 0.1%, 1%, and 5% level, respectively; p values are presented in parentheses.

Source. Own computations.

Note. N/A = no data available.

^a In the Nicaraguan COE competition 2003 the threshold was a score of 80 instead of 84. This was changed in 2004.

Source. Own computations based on FAOSTAT, ICO Database, and UN Comtrade.

Statement by the chief buyer of the major United Kingdom retailer of coffee (Kaplinski & Fitter, 2004, p. 7).

Council Regulation (EEC) No. 2081/92 on the protection of geographical indications and designations of origin for agricultural products was replaced by Council Regulation (EC) No. 510/2006 in March 2006 as a response to a WTO Panel ruling criticizing two main components of the former regulation (European Commission, 2006).

SCAA was founded 1982 as a reaction to the decline in coffee quality offered by mainstream roasters. Today it is the world's largest coffee trade association with over 3,000 member companies (SCAA, 2007).

The countries are Bolivia, Brazil, Colombia, Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua.

This includes all coffees labeled Sulawesi, Celebes Kalossi, or Celebes Kalossi Toraja.

Because the dependent variable appears in logarithmic form, the percentage interpretation of the dummy variable has to be calculated as 100*(exp(ß)-1) (Halvorsen & Palmquist, 1980).

The price flexibility is the percentage of change in the price of a good associated with a 1% change in quantity, ceteris paribus (Houck, 1965, p. 1).

This was the winning coffee farmer in the Colombian COE auction in 2007.